The Board of Directors of Swedish Match proposes terms for redemption

Wed, Apr 22, 1998 13:00 CET

The Board of Directors of Swedish Match proposes terms for redemption
On 24 February 1998, the Board of Directors of Swedish Match resolved to
propose to the Annual General Meeting on 29 April 1998 to resolve to carry out
a redemption of shares in the company in the amount of SEK 1,200 million. The
proposal is based upon Swedish Match's strong financial position and lies
within the framework of the established program statement by the Board of
Directors regarding the transfer of surplus funds to the shareholders. The
proposed redemption of shares in 1998 will, in the opinion of the Board of
Directors, not affect the company's ability to implement its ambitious growth
strategy.
The Board of Directors has today specified the terms and conditions of the
proposed redemption, which is subject to the approval of the company's
shareholders at the Annual general Meeting on 29 April 1998. The following
information regarding the proposed redemption, including the approximate
number of shares to be redeemed and the redemption amount, remains subject to
change.
All shareholders of Swedish Match will be offered the opportunity to redeem
each 13th share in exchange for a cash payment of SEK 35 per share. For each
share in Swedish Match, one redemption right shall be received. 13 redemption
rights will entitle the holder to redeem one share in Swedish Match. If all
redemption rights are exercised, a maximum of 35,658,327 shares will be
redeemed and a maximum of SEK 1,248 million will be transferred to the
shareholders of Swedish Match through the redemption procedure.
The first day for trading in shares in Swedish Match without redemption rights
is planned for 6 May 1998. The record date for receipt of redemption rights is
planned for 8 May 1998. The application period is anticipated to run from 13
May until 12 June 1998. Informational material will be distributed to all
shareholders in conjunction with the commencement of the application period.
Trading in redemption rights is anticipated to take place on the Stockholm
Stock Exchange between 13 May and 9 June. A parallel offer will be directed to
U.S. and Canadian shareholders and holders of ADRs. Trading in ADR rights is
anticipated to take place on NASDAQ between May 13 and June 12.
It is proposed that, at an extraordinary general meeting of Swedish Match on 7
July, the necessary resolutions be adopted for redemption of shares pursuant
to applications for redemption. Payment of the redemption amount is
anticipated to take place at the end of July/beginning of August.
In order to restore the share capital to an amount equivalent to the share
capital before the redemption procedure, the Board of Directors intends to
propose a private new issue of a maximum of 4 million shares. The new issue
shall be effected in accordance with market terms and conditions, and shall be
directed to Föreningssparbankernas aktiefonder, The National Pension Fund-
Fourth Fund Board, SPP, and Ratos. It is also proposed that the extraordinary
general meeting resolve to carry out a bonus issue through a transfer to the
share capital from the share premium reserve and the statutory reserve.
Through such procedure, it is intended that the nominal value of the share
increase from SEK 2.00 to 2.20, which will result in a total of about SEK 86.1
million being transferred to the share capital. The share capital will thereby
be restored to the level applicable prior to the redemption procedure.
Through the new issue and bonus issue procedures, payment of the redemption
amount can be made within one month after the extraordinary general meeting as
compared to the normal case of four to six months. This is made possible
because through the procedure described above the district court approval is
not required in order to pay the redemption amount.
The effects of the redemption on the income statement and balance sheet, as
well as the key ratios, are reported in a separate table for pro forma
accounts. The pro forma accounts are based on the annual accounts for the 1997
operating year.
PRO FORMA ACCOUNTS
The pro forma accounts have been based on Swedish Match's accounts for 1997,
whereupon adjustments have been made for the effects of the redemption and new
issue. The pro forma income statement for 1997 has been prepared as if the
redemption and new issue were carried out on 1 January 1997. The pro forma
balance sheet for 1997 has been prepared as if the redemption and new issue
were carried out on 31 December 1997. The pro forma information has also been
based on the following assumptions:
that the redemption offer is accepted in its entirety;
that the redemption price is established at SEK 35;
that SEK 71.3 million is raised through the new issue;
that the new issue price per share is established at SEK 27, corresponding to
the market price at the time of the issue;
that the net redemption amount (redemption amount less the new issue proceeds)
is financed through short-term loans at a rate of interest of 5 percent; and
that the effect of the increased interest costs on the net profit is
calculated on the basis of a 28 percent standard tax rate.
The pro form accounts are prepared on the assumption that shareholders at the
annual general meeting on 29 April 1998 adopt the resolution to effect
redemption, and the assumption that shareholders at the extraordinary general
meeting on 7 July 1998 adopt the necessary resolutions for redemption of
shares pursuant to applications for redemption.
CONSOLIDATED INCOME
STATEMENT
1997 1997
SEK million ActualAdjustmen Pro forma
ts
Sales 7 465 7 465
Cost of goods sold -3 615 -3 615
Gross margin 3 850 3 850
Selling, administrative and -2 281 -2 281
other expenses
Share of earnings in 17 17
associated companies
Operating profit 1 586 1 586.0
Financial items, net -28 -59 -87
Profit after financial items 1 558 -59 1 499
Taxes -512 16 -496
Minority interest -1 -1
Profit for the year 1 045 -43 1 002
CONSOLIDATED BALANCE SHEET
Dec. 31, Dec. 31,
1997 1997
SEK million ActualAdjustmen Pro forma
ts
Intangible assets 757 757
Tangible and other operating 2 226 2 226
fixed assets
Financial assets 308 308
Current operating assets 3 125 3 125
Current financial 153 153
receivables
Cash and bank 563 563
Total assets 7 132 7 132
Equity 2 972 -1 177 1 795
Minority 20 20
Provisions 656 656
Long-term liabilities to 209 209
credit institutions
Other long-term liabilities 27 27
Short-term liabilities to 825 1 177 2 002
credit institutions
Other short-term financial 290 290
liabilities
Short-term operating 2 133 2 133
liabilities
Total equity, provisions and 7 132 0 7 132
liabilities
KEY RATIOS AND DATA PER
SHARE
1997
1997Adjustmen Pro forma
ts
Number of shares 463 558 -33 016 430 541
252 969 283
1
Earnings per share, SEK 2.20 2.33
1
Equity per share, SEK 6.25 4.17
Net debt, SEK million 471 1 648
Net debt/equity ratio, % 15.7 90.8
Interest coverage ratio, 24.9 13.1
times
Equity/assets ratio, % 41.9 25.4
2
Return on shareholders' 39.5 68.4
equity, %
1)
Since the redemption amount per share exceeds the share price, the earnings
per share and equity per share in 1997 have been adjusted in order to permit
comparison with the earnings per share and book equity per share after
redemption. The adjustment has been based on a assumed share price prior to
redemption of SEK 27, a redemption amount of SEK 35 and that every thirteenth
share is redeemed. The adjustment factor has been calculated as (13*27 - 35) /
12 / 27 = 0,9753. Without adjustment the earnings per share and equity per
share amounted to SEK 2,25 and 6,41 respectively.
2)
Return on shareholders' equity has been defined as profit for the year
divided by average shareholders' equity, calculated as the opening and closing
balances divided by two. Since profit for the year pro forma 1997 has been
calculated as if redemption was effected on January 1, 1997, the opening
balance shareholders' equity been reduced by the net redemption amount
(redemption amount less the new issue proceeds) when calculating the return on
shareholders' equity pro forma 1997. Before adjustment, the opening
shareholders' equity balance amounted to SEK 2,314 million.
Swedish Match is a company specialised in Tobacco, Matches and Lighter
products with a turnover of approximately MSEK 7,500 and more than 6,500
employees in approximately 80 offices and factories worldwide. Swedish Match
is a listed company both at the Stockholm Stock Exchange and at the
NASDAQ, USA.
For additional information, please contact:
Jan Gabrielsson, Senior Vice President, CFO +46 8 658 01 72
Boel Sundvall, Vice President, Investor Relations +46 8 658 01 73
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About Us

Swedish Match develops, manufactures, and sells quality products with market-leading brands. Swedish Match’s product areas are Snus and moist snuff, Other tobacco products (cigars and chewing tobacco), Lights (matches, lighters, and complementary products), and Other operations. Production is located in six countries, with sales concentrated in Scandinavia and the US. The Swedish Match share is listed on Nasdaq Stockholm (SWMA).
Swedish Match’s vision is a world without cigarettes. Some of its well-known brands include: General, Longhorn, White Owl, Red Man, Fiat Lux, and Cricket.